Israel’s economy will shrink by 2 per cent this quarter as hundreds of thousands of workers are forced out of their jobs because of the war with Hamas or called up into the army, The New York Times reports.
More than 20 percent left the job market in October, up from 3 percent before the war began, according to a report by the Taub Center for Social Policy Research, a nonpartisan think tank in Israel.
The surge in unemployment came as more than 900,000 people were conscripted for the war, stayed home to care for children because schools were closed, evacuated from towns near the borders with Lebanon and Gaza, or were unable to work because of physical damage to their industries.
Since October, some students have been able to return to school and some displaced Israelis have switched to working remotely. Nevertheless, the economic impact of such a massive disruption could be significant, especially given that the war is not yet over.
Forecasts for economic growth next year are lower than previously thought, but ranges vary, with some analysts saying the economy could grow by as little as 0.5 per cent. The Bank of Israel gave perhaps the most optimistic forecast of 2 per cent, citing Israel’s faster-than-expected recovery from previous wars and the Covid-19 pandemic. Karnit Flug, the vice president of research at the Israel Democracy Institute and a former governor of the Bank of Israel, noted:
“The wide range of projections that we are seeing comes from some of the different assumptions about how long and how intense the fighting will be.”
191,666 Israelis have applied for unemployment benefits since the war began on October 7, most of them claiming forced unpaid leave, according to the Taub Centre.
Some 360,000 reservists were called up for service in October, the largest mobilisation since the 1973 Arab-Israeli war, also known as the Yom Kippur War. This time, the Taub Centre estimates that the actual number of reservists called up for service was between 200,000 and 300,000, of whom 139,000 were forced out of the labour market.
As a result, many Israelis went to war, leaving many employers stranded. And while the Israeli government has provided some financial assistance to many affected individuals and companies, promised additional subsidies have been slow to arrive. Some reservists are self-employed and say the wait is taking an irreparable toll on their businesses.
The Taub Centre reported that as of October, up to a fifth of workers in medium and large companies were on reserve, citing data from Israel’s Central Bureau of Statistics. Such companies with at least 100 employees employ more than half of Israel’s labour force.
The tourism, construction and agricultural sectors were particularly affected by labour shortages. The latter two sectors rely heavily on Palestinian workers, who have been banned from entering Israel since 7 October.
